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Why Arthur J. Gallagher (AJG) Stock Is Highly Active Today

NEW YORK (TheStreet) -- Arthur J. Gallagher (AJG - Get Report) was extremely active in trading on Friday after the insurance brokerage firm priced an offering of its common stock.

Arthur J. Gallagher priced 19 million shares at $43.25. The firm sold approximately $821.8 million in shares to fund its $950 million acquisition of the insurance brokerage operation of Perth, Australia-based Wesfarmers. This is Gallagher's largest acquisition to date.

The stock was up 0.21% to $43.75 at 9:43 a.m. Nearly 3.5 million shares had changed hands, well above the average volume of 731,318.

Separately, TheStreet Ratings team rates ARTHUR J GALLAGHER & CO as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARTHUR J GALLAGHER & CO (AJG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, increase in stock price during the past year, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The revenue growth greatly exceeded the industry average of 13.9%. Since the same quarter one year prior, revenues rose by 32.2%. Growth in the company's revenue appears to have helped boost the earnings per share.

ARTHUR J GALLAGHER & CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ARTHUR J GALLAGHER & CO increased its bottom line by earning $2.07 versus $1.60 in the prior year. This year, the market expects an improvement in earnings ($2.40 versus $2.07).

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, ARTHUR J GALLAGHER & CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

AJG's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.80 is weak.